The oil and gas law of the land: your guide to Act 13

Background

After years of deliberation on the issue, legislators passed the bill on February 8, 2012.

The Zoning Battle

Over the past two years portions of Act 13 have been caught up in an ongoing legal battle.

The case has pitted a number of local governments against the Corbett administration. The main issue centers on who gets to decide how to zone oil and development.

In July 2012, the Commonwealth Court threw out a section of the law restricting local governments’ ability to zone and regulate natural gas drilling. The Corbett administration appealed the decision to the Supreme Court of Pennsylvania.

In a 4-2 decision in December 2013, the State Supreme Court agreed with the lower court, and held that portions of the law restricting local zoning were unconstitutional.

One section of the law that was struck down called for statewide rules on oil and gas to preempt local zoning rules. Another section required municipalities to allow oil and gas development in all zoning areas.

In the majority opinion, written by Chief Justice Ronald Castille, the court determined both those provisions violate the Environmental Rights Amendment of the state constitution which guarantees Pennsylvanians the right to, “clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment.”

Castille cited the state’s history with coal and timber as lessons which lead to the amendment.

“Pennsylvania has a notable history of what appears, retrospectively, to have been a shortsighted exploitation of its bounteous environment, affecting its minerals, its water, its air, its flora and fauna and its people,” he wrote.

But the high court’s ruling didn’t close the case for good. In its December 2013 decision, the Supreme Court sent some provisions of the law back down to the lower Commonwealth Court.

Despite the legal battle, most of the law will remain in tact. The Commonwealth Court was only examining a narrow set of issues.

In a July 2014 ruling, the Commonwealth Court threw out most of the remaining challenges to the law, but it upheld the notion that local governments– not the state– have the authority to zone oil and gas development.

Appeals are possible from both sides.

The Fee

Act 13 places a so-called “impact fee” on every well drilling for gas in the Marcellus Shale formation. The levy changes from year to year based on natural gas prices and the Consumer Price Index, but in 2013, gas companies paid $50,000 for each new well they drilled. (Smaller, vertical wells were $10,000.)

So far, the impact fee has brought in $630 million to Pennsylvania ($204 million in 2011, $202 million during 2012, and $224 million in 2013). The amounts change annually based on the number of wells drilled and the price of natural gas.

Sixty percent of the impact fee revenue stays at the local level, going to counties and municipalities hosting wells. The rest goes to various state agencies involved in regulating drilling and to the Marcellus Legacy Fund– which gets spread out around the state for environmental and infrastructure projects.

These are the top five counties receiving the most impact fee money in 2013 :

Bradford $7 million

Washington $6.1 million

Susquehanna $5.5 million

Lycoming $5 million

Tioga $4.4 million

Other Changes

Other notable aspects of the legislation:

The bill authorizes the annual trans­fer of mil­lions of dol­lars from the Oil and Gas Lease Fund to the Envi­ron­men­tal Stew­ard­ship Fund and Haz­ardous Sites Cleanup Fund.

Drillers’ zone of presumed liability will expand from 1,000 to 2,500 feet. That means if a water source within this area is contaminated, the assumption will be that drilling messed it up.

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